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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
| | | | | | | | | | | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | September 30, 2020 |
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission file number: 001-38335
Liberty Latin America Ltd.
(Exact name of Registrant as specified in its charter)
| | | | | | | | |
Bermuda | | 98-1386359 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| |
2 Church Street, | | |
Hamilton | | HM 11 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (441) 295-5950 or (303) 925-6000
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered |
Class A Common Shares, par value $0.01 per share | LILA | The NASDAQ Stock Market LLC |
Class C Common Shares, par value $0.01 per share | LILAK | The NASDAQ Stock Market LLC |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large Accelerated Filer | ☑ | Accelerated Filer | ☐ | Non-Accelerated Filer | ☐ |
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ | | |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
| | | | | | | | | | | |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | Yes | ☐ | No þ |
The number of outstanding common shares of Liberty Latin America Ltd. as of October 31, 2020 was: 48,992,012 Class A; 1,933,386 Class B; and 181,081,015 Class C.
LIBERTY LATIN AMERICA LTD.
TABLE OF CONTENTS
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| | Page Number |
| PART I - FINANCIAL INFORMATION | |
Item 1. | FINANCIAL STATEMENTS | |
| Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited) | |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) | |
| Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) | |
| Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) | |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited) | |
| Notes to Condensed Consolidated Financial Statements (unaudited) | |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
Item 4. | CONTROLS AND PROCEDURES | |
| PART II - OTHER INFORMATION | |
Item 1. | LEGAL PROCEEDINGS | |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |
Item 6. | EXHIBITS | |
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
|
| in millions |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,611.9 | | | $ | 1,183.8 | |
Trade receivables, net of allowances of $96.8 million and $87.3 million, respectively | 505.9 | | | 585.2 | |
| | | |
Prepaid expenses | 62.2 | | | 58.9 | |
Other current assets, net | 225.6 | | | 227.3 | |
Total current assets | 2,405.6 | | | 2,055.2 | |
| | | |
Goodwill | 4,503.7 | | | 4,906.4 | |
Property and equipment, net | 4,149.8 | | | 4,301.1 | |
Restricted cash | 1,369.9 | | | 1,272.2 | |
Intangible assets subject to amortization, net | 825.5 | | | 969.2 | |
Intangible assets not subject to amortization | 561.3 | | | 560.8 | |
Other assets, net | 782.1 | | | 872.6 | |
Total assets | $ | 14,597.9 | | | $ | 14,937.5 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS – (Continued)
(unaudited)
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
|
| in millions |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 269.6 | | | $ | 346.6 | |
Current portion of deferred revenue | 138.0 | | | 160.9 | |
Current portion of debt and finance lease obligations | 284.4 | | | 180.2 | |
Accrued capital expenditures | 47.9 | | | 72.1 | |
Accrued interest | 118.9 | | | 132.6 | |
| | | |
Accrued payroll and employee benefits | 80.8 | | | 88.9 | |
Other accrued and current liabilities | 645.5 | | | 594.7 | |
Total current liabilities | 1,585.1 | | | 1,576.0 | |
Long-term debt and finance lease obligations | 8,175.4 | | | 8,189.8 | |
Deferred tax liabilities | 361.5 | | | 401.8 | |
Deferred revenue | 187.0 | | | 210.9 | |
Other long-term liabilities | 761.2 | | | 579.1 | |
Total liabilities | 11,070.2 | | | 10,957.6 | |
| | | |
Commitments and contingencies | | | |
| | | |
Equity: | | | |
Liberty Latin America shareholders: | | | |
Class A, $0.01 par value; 500,000,000 shares authorized; 49,186,678 and 48,892,862 shares issued and outstanding, respectively, at September 30, 2020 and 48,795,552 shares issued and outstanding at December, 31, 2019 | 0.5 | | | 0.5 | |
Class B, $0.01 par value; 50,000,000 shares authorized; 1,933,414 shares issued and outstanding at September 30, 2020 and 1,934,686 shares issued and outstanding at December 31, 2019 | — | | | — | |
Class C, $0.01 par value; 500,000,000 shares authorized; 181,099,655 and 180,426,497 shares issued and outstanding, respectively, at September 30, 2020 and 131,181,371 shares issued and outstanding at December 31, 2019 | 1.8 | | | 1.3 | |
Undesignated preference shares, $0.01 par value; 50,000,000 shares authorized; nil shares issued and outstanding at each period | — | | | — | |
Treasury shares, at cost; 966,974 and nil shares, respectively | (9.5) | | | — | |
Additional paid-in capital | 4,972.4 | | | 4,569.9 | |
Accumulated deficit | (2,105.6) | | | (1,447.1) | |
Accumulated other comprehensive loss, net of taxes | (83.2) | | | (14.8) | |
Total Liberty Latin America shareholders | 2,776.4 | | | 3,109.8 | |
Noncontrolling interests | 751.3 | | | 870.1 | |
Total equity | 3,527.7 | | | 3,979.9 | |
Total liabilities and equity | $ | 14,597.9 | | | $ | 14,937.5 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| in millions, except share and per share amounts |
| | | | | | | |
Revenue | $ | 887.5 | | | $ | 966.8 | | | $ | 2,667.4 | | | $ | 2,892.4 | |
Operating costs and expenses (exclusive of depreciation and amortization, shown separately below): | | | | | | | |
Programming and other direct costs of services | 189.7 | | | 215.7 | | | 580.2 | | | 664.1 | |
Other operating costs and expenses | 365.6 | | | 386.5 | | | 1,105.8 | | | 1,140.6 | |
Depreciation and amortization | 231.6 | | | 226.0 | | | 661.5 | | | 665.3 | |
Impairment, restructuring and other operating items, net | 14.0 | | | 208.3 | | | 331.5 | | | 235.3 | |
| 800.9 | | | 1,036.5 | | | 2,679.0 | | | 2,705.3 | |
Operating income (loss) | 86.6 | | | (69.7) | | | (11.6) | | | 187.1 | |
Non-operating income (expense): | | | | | | | |
Interest expense | (129.9) | | | (123.9) | | | (408.5) | | | (359.4) | |
Realized and unrealized gains (losses) on derivative instruments, net | (78.1) | | | 51.4 | | | (239.7) | | | (96.6) | |
Foreign currency transaction gains (losses), net | 30.1 | | | (110.8) | | | (115.1) | | | (98.1) | |
Losses on debt modification and extinguishment | (41.7) | | | (3.5) | | | (45.1) | | | (13.0) | |
Other income, net | 0.2 | | | 4.4 | | | 11.8 | | | 9.4 | |
| (219.4) | | | (182.4) | | | (796.6) | | | (557.7) | |
Loss before income taxes | (132.8) | | | (252.1) | | | (808.2) | | | (370.6) | |
Income tax benefit | 42.8 | | | 182.4 | | | 33.4 | | | 148.5 | |
Net loss | (90.0) | | | (69.7) | | | (774.8) | | | (222.1) | |
Net loss attributable to noncontrolling interests | 5.4 | | | 105.0 | | | 116.5 | | | 99.7 | |
Net earnings (loss) attributable to Liberty Latin America shareholders | $ | (84.6) | | | $ | 35.3 | | | $ | (658.3) | | | $ | (122.4) | |
| | | | | | | |
Basic and diluted net earnings (loss) per share attributable to Liberty Latin America shareholders | $ | (0.46) | | | $ | 0.19 | | | $ | (3.59) | | | $ | (0.66) | |
| | | | | | | |
Weighted average shares outstanding - basic | 185,380,797 | | | 184,452,387 | | | 183,286,840 | | | 184,238,994 | |
Weighted average shares outstanding - diluted | 185,380,797 | | | 184,807,225 | | | 183,286,840 | | | 184,238,994 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| in millions |
| | | | | | | |
Net loss | $ | (90.0) | | | $ | (69.7) | | | $ | (774.8) | | | $ | (222.1) | |
Other comprehensive earnings (loss), net of taxes: | | | | | | | |
Foreign currency translation adjustments | (27.4) | | | (6.8) | | | (67.8) | | | (32.5) | |
Reclassification adjustments included in net earnings (loss) | 0.6 | | | (0.8) | | | (2.5) | | | (4.3) | |
Pension-related adjustments and other, net | (0.5) | | | 3.2 | | | 1.1 | | | 1.3 | |
Other comprehensive loss | (27.3) | | | (4.4) | | | (69.2) | | | (35.5) | |
Comprehensive loss | (117.3) | | | (74.1) | | | (844.0) | | | (257.6) | |
Comprehensive loss attributable to noncontrolling interests | 5.5 | | | 105.3 | | | 117.3 | | | 100.2 | |
Comprehensive earnings (loss) attributable to Liberty Latin America shareholders | $ | (111.8) | | | $ | 31.2 | | | $ | (726.7) | | | $ | (157.4) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Latin America shareholders | | Non-controlling interests | | Total equity |
| Common shares | | Treasury Stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss, net of taxes | | Total Liberty Latin America shareholders |
| Class A | | Class B | | Class C |
| in millions |
| | | | | | | | | | | | | | | | | | | |
Balance at July 1, 2019 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | — | | | $ | 4,549.3 | | | $ | (1,524.7) | | | $ | (47.2) | | | $ | 2,979.2 | | | $ | 1,024.7 | | | $ | 4,003.9 | |
Net loss | — | | | — | | | — | | | — | | | — | | | 35.3 | | | — | | | 35.3 | | | (105.0) | | | (69.7) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (4.1) | | | (4.1) | | | (0.3) | | | (4.4) | |
Distribution to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (0.1) | | | (0.1) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
UTS NCI Acquisition | — | | | — | | | — | | | — | | | 0.1 | | | — | | | — | | | 0.1 | | | (11.7) | | | (11.6) | |
Shared-based compensation | — | | | — | | | — | | | — | | | 12.9 | | | — | | | — | | | 12.9 | | | — | | | 12.9 | |
Other | — | | | — | | | — | | | — | | | 0.7 | | | — | | | — | | | 0.7 | | | — | | | 0.7 | |
Balance at September 30, 2019 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | — | | | $ | 4,563.0 | | | $ | (1,489.4) | | | $ | (51.3) | | | $ | 3,024.1 | | | $ | 907.6 | | | $ | 3,931.7 | |
| | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2019 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | — | | | $ | 4,494.1 | | | $ | (1,367.0) | | | $ | (16.3) | | | $ | 3,112.6 | | | $ | 1,010.8 | | | $ | 4,123.4 | |
Net loss | — | | | — | | | — | | | — | | | — | | | (122.4) | | | — | | | (122.4) | | | (99.7) | | | (222.1) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (35.0) | | | (35.0) | | | (0.5) | | | (35.5) | |
Impact of the UTS Acquisition | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 11.6 | | | 11.6 | |
Distribution to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2.6) | | | (2.6) | |
Conversion Option, net | — | | | — | | | — | | | — | | | 77.3 | | | — | | | — | | | 77.3 | | | — | | | 77.3 | |
Capped Calls | — | | | — | | | — | | | — | | | (45.6) | | | — | | | — | | | (45.6) | | | — | | | (45.6) | |
UTS NCI Acquisition | — | | | — | | | — | | | — | | | 0.1 | | | — | | | — | | | 0.1 | | | (11.7) | | | (11.6) | |
Shared-based compensation | — | | | — | | | — | | | — | | | 37.1 | | | — | | | — | | | 37.1 | | | — | | | 37.1 | |
Other | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (0.3) | | | (0.3) | |
Balance at September 30, 2019 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | — | | | $ | 4,563.0 | | | $ | (1,489.4) | | | $ | (51.3) | | | $ | 3,024.1 | | | $ | 907.6 | | | $ | 3,931.7 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY – (Continued)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liberty Latin America shareholders | | Non-controlling interests | | Total equity |
| Common shares | | Treasury Stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss, net of taxes | | Total Liberty Latin America shareholders |
| Class A | | Class B | | Class C |
| in millions |
| | | | | | | | | | | | | | | | | | | |
Balance at July 1, 2020 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | (9.5) | | | $ | 4,606.2 | | | $ | (2,021.0) | | | $ | (56.0) | | | $ | 2,521.5 | | | $ | 758.4 | | | $ | 3,279.9 | |
Net loss | — | | | — | | | — | | | — | | | — | | | (84.6) | | | — | | | (84.6) | | | (5.4) | | | (90.0) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (27.2) | | | (27.2) | | | (0.1) | | | (27.3) | |
| | | | | | | | | | | | | | | | | | | |
Issuance of Liberty Latin America common shares, net | — | | | — | | | 0.5 | | | — | | | 347.2 | | | — | | | — | | | 347.7 | | | — | | | 347.7 | |
Shared-based compensation | — | | | — | | | — | | | — | | | 19.0 | | | — | | | — | | | 19.0 | | | — | | | 19.0 | |
Other | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1.6) | | | (1.6) | |
Balance at September 30, 2020 | $ | 0.5 | | | $ | — | | | $ | 1.8 | | | $ | (9.5) | | | $ | 4,972.4 | | | $ | (2,105.6) | | | $ | (83.2) | | | $ | 2,776.4 | | | $ | 751.3 | | | $ | 3,527.7 | |
| | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2020 | $ | 0.5 | | | $ | — | | | $ | 1.3 | | | $ | — | | | $ | 4,569.9 | | | $ | (1,447.1) | | | $ | (14.8) | | | $ | 3,109.8 | | | $ | 870.1 | | | $ | 3,979.9 | |
Accounting change (note 2) | — | | | — | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | | | 0.2 | | | — | |
Balance at January 1, 2020, as adjusted for accounting change | 0.5 | | | — | | | 1.3 | | | — | | | 4,569.9 | | | (1,447.3) | | | (14.8) | | | 3,109.6 | | | 870.3 | | | 3,979.9 | |
Net loss | — | | | — | | | — | | | — | | | — | | | (658.3) | | | — | | | (658.3) | | | (116.5) | | | (774.8) | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (68.4) | | | (68.4) | | | (0.8) | | | (69.2) | |
Repurchase of Liberty Latin America common shares | — | | | — | | | — | | | (9.5) | | | — | | | — | | | — | | | (9.5) | | | — | | | (9.5) | |
Issuance of Liberty Latin America common shares, net | — | | | — | | | 0.5 | | | — | | | 347.2 | | | — | | | — | | | 347.7 | | | — | | | 347.7 | |
Shared-based compensation | — | | | — | | | — | | | — | | | 54.4 | | | — | | | — | | | 54.4 | | | — | | | 54.4 | |
Other | — | | | — | | | — | | | — | | | 0.9 | | | — | | | — | | | 0.9 | | | (1.7) | | | (0.8) | |
Balance at September 30, 2020 | $ | 0.5 | | | $ | — | | | $ | 1.8 | | | $ | (9.5) | | | $ | 4,972.4 | | | $ | (2,105.6) | | | $ | (83.2) | | | $ | 2,776.4 | | | $ | 751.3 | | | $ | 3,527.7 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
LIBERTY LATIN AMERICA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | | | | | | | | | |
| Nine months ended September 30, |
| 2020 | | 2019 |
| in millions |
Cash flows from operating activities: | | | |
Net loss | $ | (774.8) | | | $ | (222.1) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Share-based compensation expense | 75.3 | | | 45.2 | |
Depreciation and amortization | 661.5 | | | 665.3 | |
Impairment | 279.9 | | | 196.3 | |
Amortization of debt financing costs, premiums and discounts, net | 22.0 | | | 8.8 | |
Realized and unrealized losses on derivative instruments, net | 239.7 | | | 96.6 | |
Foreign currency transaction losses, net | 115.1 | | | 98.1 | |
Loss on debt modification and extinguishment | 45.1 | | | 13.0 | |
Deferred income tax benefit | (69.5) | | | (81.5) | |
Changes in operating assets and liabilities, net of the effect of acquisitions | (103.3) | | | (229.3) | |
Net cash provided by operating activities | 491.0 | | | 590.4 | |
| | | |
Cash flows from investing activities: | | | |
Capital expenditures | (418.3) | | | (432.0) | |
Cash paid in connection with acquisitions, net of cash acquired | (0.1) | | | (160.4) | |
Recovery on damaged or destroyed property and equipment | — | | | 33.9 | |
Other investing activities, net | (0.5) | | | 1.6 | |
Net cash used by investing activities | (418.9) | | | (556.9) | |
| | | |
Cash flows from financing activities: | | | |
Borrowings of debt | 1,289.0 | | | 1,641.2 | |
Payments of principal amounts of debt and finance lease obligations | (1,259.5) | | | (1,197.4) | |
Issuance of Liberty Latin America common shares, net | 349.6 | | | — | |
Net cash received (paid) related to derivative instruments | 180.6 | | | (0.3) | |
Capped Calls | — | | | (45.6) | |
Payment of financing costs and debt premiums | (75.4) | | | (35.4) | |
Repurchase of Liberty Latin America common shares | (9.5) | | | |